Home Loan News & Advice

VA Loans are mortgage loans insured by the Government that are reserved for individuals who have honorably served in the United States Armed Forces.  There are some VA Eligibility Requirements, but for the most part, any person who honorably served or is currently serving in the Army, Navy, Air Force, Marine Corps, or Coast Guard is eligible.  Contact me if you’re not sure about your eligibility. 

The official VA Home Loan was originally known in 1944 as the Servicemen’s Readjustment Act or (the GI Bill of Rights). This GI Bill became law by way of President Franklin D. Roosevelt signing it. The law provided United States veterans to purchase a federally insured or guaranteed home with no down payment. This zero down feature was designed to provide home ownership assistance for the millions of veterans and their families. It allowed the dream of home ownership to became a reality for veterans. This one act of signing the GI Bill contributed more than any other military program in history to the welfare of United States veterans and their families, thus allowing the nation’s economy to grow.

VA Refinance
For a VA Refinance transaction, the maximum allowable Loan-to-Value (LTV) is 90%.  This means you can only borrow up to 90% of the subject property’s appraised value.  The maximum allowable loan amount is $417,000.  Consolidating Credit Card Debts or other Revolving Debts and/or taking cash-out to make improvements to the property are typical uses of a VA Refinance Loan.

VA Purchase
For a VA Purchase Loan, the Borrower can actually borrow 100% of the purchase price (or the appraised value, whichever is less).  This allows for no money down purchases up to a maximum loan amount of $417,000.  Seller concessions are allowed up to 6% of the purchase price, so there is a lot of room to negotiate the purchase transaction to benefit the borrower.

Fixed Rates, No PPP, IRL
Although there are Adjustable Rate Mortgages (ARMs) available through the VA, it will very rarely make sense to get an ARM.  The fixed rates provided by the VA loans are very competitive with any rates available on the market place.  There are no Pre-Payment Penalties involved with any VA Loan.  In fact, the VA encourages you to refinance if you can improve your financing terms by offering an Interest Reduction Loan (IRL).   With an IRL, you don’t need to go through the majority of the hassle to refinance if you see an opportunity to lower your rate.  For example, if you closed on a VA Loan one year ago at 6% on a 30 year fixed and the current 30 year fixed rates are now 5.5%, you can refinance to the lower rate without needing to have your home appraised or provide any evidence of employment or income.  It doesn’t even matter if you are no longer employed!  The VA is insuring these loans and not actually lending the money.  They already have you on the books as a liability, so if you can lower your payment, it reduces their exposure because you become more likely/able to pay it back.  Therefore, you don’t need anything to do an IRL other than a timely payment history for your current VA Loan.  Visit the official site for VA Loans for more detailed information.

Funding Fee
As you now know, the VA is just insuring the loans and not actually lending the money.  For this insurance, they charge a funding fee that is added to the allowable LTV for each loan type.  The funding fee is typically 2% of the loan amount, but can be as much as 3% depending upon the Applicant’s VA Loan history and service record.  If the transaction is a refinance and the Applicant’s Funding Fee is 2%, then the allowable LTV for that loan would be 92% to allow for the financing of the funding fee.  The same applies for purchases, where in the same case, the maximum allowable LTV would be 102% to allow for the financing of the funding fee.

See this site for more information about VA Home Loans.

As always, please contact me if you have additional questions or would like to hear more about anything relating to VA Loans.